Jim Rogers: When 'Sea of Liquidity' Dries Up, Look Out

Financial markets are afloat on an "artificial sea of liquidity" thanks to central bank easing, but eventually the sea will dry up and the result won't be pretty, says star investor Jim Rogers, chairman of Rogers Holdings.

Policymakers "everywhere are under no constraint," Rogers told New York Markets Live online radio. Central banks can print as much as they want; the governments spend as much as they want. So there's no reason this can't go on for a while, because any corrections due to tapering will probably be temporary."

If markets correct in reaction to a Federal Reserve tapering of its quantitative easing, as Rogers expects, the Fed will simply restart its easing, he says.

But, "eventually, the market's going to say we say we're not going to take this garbage anymore, this is absurd," he asserts. "It's going to be a disaster. I don't see the bureaucrats coming to their senses, so it's going to be the markets, and it's going to mean a lot of unpleasant times."

Social unrest already has broken out in some countries, he says, "and it's going to get a lot worse."

"This is a lot of fun for those participating," Rogers said in reference to this year's stock-market advance. "But the overall situation is getting worse and worse. We're all going to have to live with the consequences of printing money."

The country has faced economic slowdowns every four to six years throughout its history, Rogers points out. "In 2008 it got worse, because the debt was so much higher. Look out the window. You can probably see the debt rising. It's like the beanstalk," he said.

That means the next recession in about 20014 or 2015 will be worse, Rogers says. "Be careful. Be worried. Be prepared."

Would the U.S. government be able to use some of the 8,133 metric tons of gold reserves it reports to defend the dollar?

"I don't know that it's there," Rogers said. "I have no reason to assume it's not, except that there's not been a proper audit of America's gold in decades, if ever."

But even if that is all there, "it's not nearly enough to back the dollar, because we're the largest debtor nation in history," he said.

Another expert who sees bad things ahead for the U.S. economy is Societe Generale Strategist Albert Edwards. "No one expects a recession is around the corner, but in my experience, they never ever do," he wrote last month in a commentary obtained by CNBC.

The key indicator signaling a U.S. recession is the flattening of U.S. productivity growth, Edwards says. Non-farm business productivity was unchanged in the third quarter from a year earlier.

Financial markets are afloat on an "artificial sea of liquidity" thanks to central bank easing, but eventually the sea will dry up and the result won't be pretty, says star investor Jim Rogers, chairman of Rogers Holdings.